A significant contingent of Wall Street investment firms and hedge funds, including Two Sigma Investments and D.E. Shaw, are opposing a proposal that would allow companies to opt out of quarterly financial reporting. These firms, which manage substantial capital for clients across various investment strategies, express concern that such a change would significantly reduce the flow of crucial financial information available to public company investors. Their opposition adds to a growing cohort of institutional investors, including billionaire Ken Griffin’s Citadel, who are working behind the scenes to convey their views before an expected U.S. Securities and Exchange Commission (SEC) proposal and comment period on the matter.
Discussions have recently taken place with the Managed Funds Association (MFA), an industry lobby group, where concerns were highlighted. Firms like Citadel and asset manager Fidelity also voiced opposition at an SEC investor advisory committee meeting, warning that abandoning quarterly reporting could lead to heightened market volatility, larger swings in stock prices, and an increase in companies’ costs to raise capital. They argue that regular reporting promotes accurate market valuations. The MFA has further contended that eliminating quarterly reporting could deter private investment by creating extended periods without material public disclosure.
The SEC is anticipated to formally seek feedback on this proposal in the coming weeks, reviving an initiative from the Trump administration. While some, such as Wall Street bank JPMorgan, support the change, proponents argue it would cut costs for companies and foster a longer-term business focus, moving away from “shortsightedness.” An SEC spokesperson stated the Commission aims to allow the market to dictate optimal reporting frequency, considering industry, size, and investor expectations. U.S.-listed companies have reported quarterly since 1970, unlike many European and Asian counterparts which mandate semi-annual reporting. This move faced similar opposition from heavyweights like BlackRock and T. Rowe Price during its initial proposal in 2018.
